Bill to promote free debt advice

[Michael Browne]

A Labour MP has called for new measures to "level the playing field" between fee charging debt management companies and free agencies.

 

Speaking in the Commons, Yvonne Fovargue, MP for Makerfield, asked that leave be given to bring a Bill to require fee charging debt management companies to inform potential clients of the availability of free advice on debt management.

 

She said: "I've brought forward this Bill to try and level the playing field between the fee charging debt management companies who can spend a considerable amount of money on advertising and the free agencies who put all of their money into providing a service and consequently may not be as well known."

 

It was estimated, she said, that 375,000 people in the UK were on commercially provided debt management plans costing them £250 million in debt management fees each year.

 

She added: "It is my belief that no-one should suffer through ignorance of services available to help them and I believe that this measure will inform individuals of the full range of agencies able to support them, instead of allowing them to fall into the hands of some of the fee charging companies who propel them into further debt and despair."

 

Ms Fovargue's Fee Charging Debt Management Companies (Promotion of Free Debt Management Advice) Bill received an unopposed first reading in the Commons but is unlikely to make further progress due to a lack of Parliamentary time.

 

http://www.google.com/hostednews/ukpress/article/ALeqM5iFeMHsJ9NLFvdSGhXJ762VmhBnaQ?docId=N0171781319046914202A

 

Yvonne Fovargue's speech:

http://www.publications.parliament.uk/pa/cm201011/cmhansrd/cm111019/debtext/111019-0002.htm#11101946001075

[Nick Pearson]

As DEMSA members we are already obliged to make clients aware of the existence of free sources of debt advice and information via a link on our website to the Insolvency service leaflet “In debt? Dealing with your creditors,” (see http://www.bainesandernst.co.uk/pdf/indebt-web.pdf ). In addition, in Scotland commercial debt management firms offering a Debt Arrangement Scheme are legally obliged to make customers aware that free providers are also available. It is worth noting that a very significant percentage of our customers have already tried to access free debt advice services and have decided that they wish to choose a commercial alternative. This is typically because of the speed of service we offer, our high levels of customer service and advice, the fact we deal directly with their creditors/administer their debt repayments and the fact that the service is telephone based.I am a passionate advocate of free to client debt advice services (I spent 27 years in the free debt advice sector prior to spending the last 3 years in the commercial world) and I’m more aware than most about the severe funding issues etc facing the free sector. Given the scarce resources now available I firmly believe that those who can afford to pay for fee charging advice should do so leaving free advice for those that can’t afford the fee.I would suggest an amendment to the motion that obliges CABx and other free providers to direct clients with debt problems to DEMSA members where there is likely to be a delay of more than 2 weeks before the adviser can deal with their case!

[Michael Browne]

As DEMSA members we are already obliged to make clients aware of the existence of free sources of debt advice

The only mention in DEMSA's code of conduct is:

17. Extreme Hardship Cases

Where it appears that applicants are unable to pay any management fees due to the severity

of their financial position, members should, where appropriate recommend such clients to non

profit advice centres.

You would have thought it would be required under:

8. Information to be provided to Consumers

but apparently not

 

In addition, in Scotland commercial debt management firms offering a Debt Arrangement Scheme are legally obliged to make customers aware that free providers are also available.

So why not extend that to UK wide

 

I would suggest an amendment to the motion that obliges CABx and other free providers to direct clients with debt problems to DEMSA members where there is likely to be a delay of more than 2 weeks before the adviser can deal with their case!

With an appropriate referral fee, I trust!!!!

[Wintry]

As DEMSA members we are already obliged to make clients aware of the existence of free sources of debt advice and information via a link on our website to the Insolvency service leaflet “In debt? Dealing with your creditors,” (see http://www.bainesandernst.co.uk/pdf/indebt-web.pdf ). In addition, in Scotland commercial debt management firms offering a Debt Arrangement Scheme are legally obliged to make customers aware that free providers are also available. It is worth noting that a very significant percentage of our customers have already tried to access free debt advice services and have decided that they wish to choose a commercial alternative. This is typically because of the speed of service we offer, our high levels of customer service and advice, the fact we deal directly with their creditors/administer their debt repayments and the fact that the service is telephone based.I am a passionate advocate of free to client debt advice services (I spent 27 years in the free debt advice sector prior to spending the last 3 years in the commercial world) and I’m more aware than most about the severe funding issues etc facing the free sector. Given the scarce resources now available I firmly believe that those who can afford to pay for fee charging advice should do so leaving free advice for those that can’t afford the fee.I would suggest an amendment to the motion that obliges CABx and other free providers to direct clients with debt problems to DEMSA members where there is likely to be a delay of more than 2 weeks before the adviser can deal with their case!

 

Hi Nick

 

A serious problem that some of the free agencies have (especially the face to face ones such as the CAB) is the amount of people they are seeing who have already been to the fee chargers and been basically told that they cannot help them for one reason or another (some call this processing) or when their IVAs have failed or are failing (often when they have already paid substantial fees and perhaps should never have entered into one in the first place)

 

Also I think that I read on another forum somewhere that certain fee chargers only take on something like 10% of the people who contact them...is this true and if so is it widespread across the industry Nick?

 

Maybe the CABs and perhaps others should look into some sort of levy:)

Edited October 26, 2011 by Wintry

[Nick Pearson]

Michael/WintryAs the DEMSA Code is OFT approved, members such as us are subject to additional requirements from OFT which are not required of non DEMSA debt providers. Over the last 12 months a number of requirments have been requested by the OFT and these include a requirment to signpost clients to the Insolvency Service guide, "In debt? Dealing with your creditors" which details sources of free help and advice. These additional requirments along with revision due to the new OFT debt managment guidance are currently being incoprorated into the new DEMSA members Code of Conduct. In short Michael, thats why you won't find this requirment in the current DEMSA code yet.In terms of referrals fees we already pay a number of charitable/free debt advice providers like CABx for referrals and would happily pay more agencies/CABx who want to generate some income from clients who can afford to pay for debt advice; we're a more stable and regular funding source than a local council! I was at the recent adviceUK conference where members voted in favour of allowing "free providers" who charge some clients who can afford it auk membership.In terms of the percentage of callers who we can assist with a product sale (rather than free advice and information which any caller can avail themselves of) I would say that 10% is an overestimate and 5-7% would be the industry average. Its pleasing that so many CAB clients have been to a fee charger first as it shows that commercial firms are signpostng correctly and not taking on cases unless they are the best solution for the client. We have a higher rate of client to callers than most as we offer the DRO so we can deal with this client group directly rather than refer them on. The vast majority of people we speak to get free advice and information and then we signpost them to agencies such as National Debtline. I think moving forward its likely that the new Money Advice Service may require agencies that receive fudning for debt advice to formalisereferral arangements between free and fee to ensure that those that can pay for a debt solution do so; the fact DEMSA is on the MAS debt working group gives a clue.

[Wintry]

Michael/WintryAs the DEMSA Code is OFT approved, members such as us are subject to additional requirements from OFT which are not required of non DEMSA debt providers. Over the last 12 months a number of requirments have been requested by the OFT and these include a requirment to signpost clients to the Insolvency Service guide, "In debt? Dealing with your creditors" which details sources of free help and advice. These additional requirments along with revision due to the new OFT debt managment guidance are currently being incoprorated into the new DEMSA members Code of Conduct. In short Michael, thats why you won't find this requirment in the current DEMSA code yet.In terms of referrals fees we already pay a number of charitable/free debt advice providers like CABx for referrals and would happily pay more agencies/CABx who want to generate some income from clients who can afford to pay for debt advice; we're a more stable and regular funding source than a local council! I was at the recent adviceUK conference where members voted in favour of allowing "free providers" who charge some clients who can afford it auk membership.In terms of the percentage of callers who we can assist with a product sale (rather than free advice and information which any caller can avail themselves of) I would say that 10% is an overestimate and 5-7% would be the industry average. Its pleasing that so many CAB clients have been to a fee charger first as it shows that commercial firms are signpostng correctly and not taking on cases unless they are the best solution for the client. We have a higher rate of client to callers than most as we offer the DRO so we can deal with this client group directly rather than refer them on. The vast majority of people we speak to get free advice and information and then we signpost them to agencies such as National Debtline. I think moving forward its likely that the new Money Advice Service may require agencies that receive fudning for debt advice to formalisereferral arangements between free and fee to ensure that those that can pay for a debt solution do so; the fact DEMSA is on the MAS debt working group gives a clue.

 

Hi Nick

 

Good and clever post

 

"In terms of the percentage of callers who we can assist with a product sale (rather than free advice and information which any caller can avail themselves of) I would say that 10% is an overestimate and 5-7% would be the industry average."

 

In my opinion marketing spiel at its best or is that at its worst that it easy to see through.. perhaps the other 93 to 95% all go away happy with all their problems solved.

 

Also what percentage of the 5 to 7% product sales or solutions if you like actually complete - eg what percentage of IVAs fail and also then end up at the CABs & other agencies

 

Perhaps the Money Advice Service need to look at these type of figures and ask how on earth do CABs and other agencies possibly manage on the funding they currently get we must put more finances into these organisations.

 

Remember Nick earlier this year when the powers that be nearly pulled the EMMA / FIF funding with the intention of replacing it with......only then to conduct a spectacular (but low key Friday night) U turn.

 

As far as I am aware The Money Advice Service has been set up to help people with their finances and debt in these worrying times and there is no quick and easy fix and running a service like a business wont work and there are organistions who dont just help a small percentage of people who contact them with 'product sales'

 

As you know there are things going on behind the scenes as far as the MAS is concerned with decisions still to be taken and there may be a number of surprises to come down the line with people fully prepared to fight their corner, trust me.

 

PS-

 

I dont know if I read this right - but are you saying that you already pay referral fees to CABs?

Edited October 27, 2011 by Wintry
Adding paragraph

[Nick Pearson]

Hi WintryThe 93-95% that we don't take on as customers fall into a number of different types; eg those who no DI but have assets etc and can't go bankrupt or apply for a DRO and who we refer on to free providers, those that simply want to borrow more money and are not interested in resolving their debts except by that route, those people who can actually afford all their repayments but want to reduce them so they can spend elsewhere, the list goes on.In terms of MAS, I certainly hope they do come up with substancial funds via the FSA levy to not only match what agencies got via FiF but to enhance it but I suspect that the price for that will be systemic changes in how debt advice is delivered by free providers and to who they can provide that service. You do read it correctly by the way and we do pay referal fees to CABx and other traditionally free to client charities. Its something I was keen to encourage when I worked in the free sector as well as agencies charging wethier client for the service eg like a fellow EMMA member based in Northampton. Referral fees are paid by a number of other providers in the free to client DM sector eg NDL get fees from CCCS and Payplan for DMP's and from the NDL IVA panel for IVA leads. For obvious reasons both parties ,whether they be CABx or others, want to keep this pretty quiet but its a growing trend. For those organisations who have traditionally received a lot of free DMP/IVA leads from free face to face services this is a real challenge and a worry re profit levels at a time of declining fair share contributions.

[Wintry]

Hi WintryThe 93-95% that we don't take on as customers fall into a number of different types; eg those who no DI but have assets etc and can't go bankrupt or apply for a DRO and who we refer on to free providers, those that simply want to borrow more money and are not interested in resolving their debts except by that route, those people who can actually afford all their repayments but want to reduce them so they can spend elsewhere, the list goes on.In terms of MAS, I certainly hope they do come up with substancial funds via the FSA levy to not only match what agencies got via FiF but to enhance it but I suspect that the price for that will be systemic changes in how debt advice is delivered by free providers and to who they can provide that service. You do read it correctly by the way and we do pay referal fees to CABx and other traditionally free to client charities. Its something I was keen to encourage when I worked in the free sector as well as agencies charging wethier client for the service eg like a fellow EMMA member based in Northampton. Referral fees are paid by a number of other providers in the free to client DM sector eg NDL get fees from CCCS and Payplan for DMP's and from the NDL IVA panel for IVA leads. For obvious reasons both parties ,whether they be CABx or others, want to keep this pretty quiet but its a growing trend. For those organisations who have traditionally received a lot of free DMP/IVA leads from free face to face services this is a real challenge and a worry re profit levels at a time of declining fair share contributions.

 

Hi Nick

 

Thanks for that

 

I think we have exausted the percentage debate and I see it first hand almost every day... people on here can make their own minds up.

 

I agree with you on the MAS issues and I suspect we both know what is going on behind the scenes.

 

Im aware of most of the fee referral 'business' you mention however not the CAB part -

 

I have to agree with you on the publicity bit also.

 

I know of people in the CABs who feel that they are just being used and have never been fooled by the clever marketing and smiling faces and have also not forgot who did and did not excactly support them in their desperate times early in the year.

 

Nick, you may well be proved right on the organisations that have tradtionally received IVA/DMP referrals in more ways than one.

 

These are potentially very interesting times indeed.

[Wintry]

Hi

 

http://www.credittoday.co.uk/article/11208/online-news/demsa-imposes-sanctions-on-member

 

paras taken below -

 

A commercial debt management firm has been fined, disciplined, and reported to the industry regulator by one of the industry’s main trade bodies for masquerading as a free debt advice provider.

The firm, which has not yet been identified, has provided the Debt Managers Standards Association (DEMSA) with a written undertaking that it will not advertise or promote itself in a way which suggests it offers free debt management services to clients.

 

It follows a hearing in front of DEMSA’s Compliance and Discipline Panel in October, where the firm, dubbed “Member X”, promised to refrain from using words such as Citizens Advice, Citizens Debt Advice, CCCS, Government Debt Help, or any combination of the four, to market its services.

 

Member X has also been warned that it faces suspension or expulsion from DEMSA if there is any further violation of its code. The sanctions against the firm have been reported to the Office of Fair Trading, and the firm has been fined £15,000 and ordered to pay the costs of the Panel hearing.

 

'dubbed' MEMBER X - now thats what I call transparency!

 

You could not make this up...could you?

 

Any comments Nick? or even tell us the name of MEMBER X

 

PS - for anyone who might be interested here is the link to DEMSAs code of conduct (I found section 7 quite interesting)

 

http://www.demsa.co.uk/code-of-conduct/

 

OFT...well what can you say?

 

As always just my independent opinions and views

Edited November 10, 2011 by Wintry

[Nick Pearson]

Hi

 

http://www.credittoday.co.uk/article/11208/online-news/demsa-imposes-sanctions-on-member

 

paras taken below -

 

A commercial debt management firm has been fined, disciplined, and reported to the industry regulator by one of the industry’s main trade bodies for masquerading as a free debt advice provider.

The firm, which has not yet been identified, has provided the Debt Managers Standards Association (DEMSA) with a written undertaking that it will not advertise or promote itself in a way which suggests it offers free debt management services to clients.

 

It follows a hearing in front of DEMSA’s Compliance and Discipline Panel in October, where the firm, dubbed “Member X”, promised to refrain from using words such as Citizens Advice, Citizens Debt Advice, CCCS, Government Debt Help, or any combination of the four, to market its services.

 

Member X has also been warned that it faces suspension or expulsion from DEMSA if there is any further violation of its code. The sanctions against the firm have been reported to the Office of Fair Trading, and the firm has been fined £15,000 and ordered to pay the costs of the Panel hearing.

 

'dubbed' MEMBER X - now thats what I call transparency!

 

You could not make this up...could you?

 

Any comments Nick? or even tell us the name of MEMBER X

 

PS - for anyone who might be interested here is the link to DEMSAs code of conduct (I found section 7 quite interesting)

 

http://www.demsa.co.uk/code-of-conduct/

 

OFT...well what can you say?

 

As always just my independent opinions and views

 

Sorry Wintry, just picked this up. This case highlighted an issue which I and perhaps other Board members hadn't thought of before ie publicity re firms fined by the DEMSA disciplinary commitee. The revised code of conduct for members is currently being produced and I think that this revised version will give the commitee the power to "name and shame." The current version does not give the commitee that power hence why the member is referred to as "X"

[Wintry]

Sorry Wintry, just picked this up. This case highlighted an issue which I and perhaps other Board members hadn't thought of before ie publicity re firms fined by the DEMSA disciplinary commitee. The revised code of conduct for members is currently being produced and I think that this revised version will give the commitee the power to "name and shame." The current version does not give the commitee that power hence why the member is referred to as "X"

 

Hi Nick

 

Thank you for the interesting reply

 

I wonder if your thoughts turn out to be true regarding "this revised version" / "the power to name and shame" and that.

 

There did not seem to be problem using names or words.

 

The OFT code looks a bit out of place in all this and a little hard to take serious given the recent anouncements etc.

 

Trust and Transparency?

 

I think the cricket term for this would be "opened up like a can of beans"

 

As always, just my personal opinions

[Wintry]

Hi

 

Interesting article from Insolvency News -

 

http://www.insolvencynews.com/article/show/Fee-chargers-under-scrutiny-at-Select-Committee

 

"Very significant issues" currently being faced"

 

"Fee-charging debt management companies came under the microscope this week at the Department of Business, Innovation and Skills' Select Committee."

 

"Among the issues raised were the problem of debt management companies who appear to act as charities"

 

DEMSA / OFT ?

 

As I have already said, you could not make it up.......could you?

 

I suppose you have to laugh.

Edited November 24, 2011 by Wintry

[Wintry]

Hi

 

Citizens Advice announces campaign - Debt advice firms mentioned again

 

http://www.citizensadvice.org.uk/index/pressoffice/press_index/press_20111125.htm

 

"Debt advice firms – mentioned by 46%. This refers to taking huge amounts in fees but not sorting out people’s debts;"

Edited November 26, 2011 by Wintry

[Nick Pearson]

The House of Commons BIS Select Committee met yesterday. DEMSA, DRF, Payplan, Greg Penn and Money Plus Group all gave evidence. The meeting lasted 35 mins and can be listened to at http://www.parliamentlive.tv/Main/Player.aspx?meetingId=9559&player=silverlight The relevant part starts at 11.43.30For more information about the Committee see http://www.parliament.uk/business/committees/committees-a-z/commons-select/business-innovation-and-skills

[Wintry]

The House of Commons BIS Select Committee met yesterday. DEMSA, DRF, Payplan, Greg Penn and Money Plus Group all gave evidence. The meeting lasted 35 mins and can be listened to at http://www.parliamentlive.tv/Main/Player.aspx?meetingId=9559&player=silverlight The relevant part starts at 11.43.30For more information about the Committee see http://www.parliament.uk/business/committees/committees-a-z/commons-select/business-innovation-and-skills

 

Hi Nick,

 

Thanks for this.

 

Nice to see all the profit making debt advice business people together:)

 

But for the sake of transparency as far as the consumer and public at large is concerned -

 

Who is Member X

 

After all we have all got the interests of the debtor to heart, have we not Nick?

Edited December 4, 2011 by Wintry

[seanamarts]

Can we keep it civil please.

 

Thank you

[Wintry]

Can we keep it civil please.

 

Thank you

 

Hi sean

 

With hindsight. you are right, a little overkill maybe - so took a few lines out.

 

Fair questions though about naming... in my opinion

[seanamarts]

Hi sean

 

With hindsight. you are right, a little overkill maybe - so took a few lines out.

 

Fair questions though about naming... in my opinion

 

Thank you, but we would rather not name names in the forum

[Nick Pearson]

Hi Nick,

 

Thanks for this.

 

Nice to see all the profit making debt advice business people together:)

 

But for the sake of transparency as far as the consumer and public at large is concerned -

 

Who is Member X

 

After all we have all got the interests of the debtor to heart, have we not Nick?

 

Hi WintryThought your original post was civil enough but then I have a thick skin! it was a splendid event at the Commons; only wish I could have been there to give evidence but other pressing issues.As I mentioned here before I think, the DEMSA membership rules didn't allow the Complaints committee to "name and shame." The complaints commitee is chaired by Sir Harry Ognall and is independent of the DEMSA Board (eg Caroline Siakowitz, CEO of IMA is on it). Anyway the commitee have recommended that in the light of this case they should have that option to name and shame so the DEMSA Board have changed the membership rules to reflect this. In short, I can't name member X.

[Wintry]

Hi WintryThought your original post was civil enough but then I have a thick skin! it was a splendid event at the Commons; only wish I could have been there to give evidence but other pressing issues.As I mentioned here before I think, the DEMSA membership rules didn't allow the Complaints committee to "name and shame." The complaints commitee is chaired by Sir Harry Ognall and is independent of the DEMSA Board (eg Caroline Siakowitz, CEO of IMA is on it). Anyway the commitee have recommended that in the light of this case they should have that option to name and shame so the DEMSA Board have changed the membership rules to reflect this. In short, I can't name member X.

 

Hi Nick

 

Fully paid members of the thick skinned club we both are but for the record the original post was a bit of a let down looking back (perhaps I was up too late that night or morning) but genuine thanks and respect for the reply anyway.

 

Splendid event though? go steady there Nick you will have us in tears:)

 

If there is a next time we shall have wait & to see if the 'option' is used, maybe the board members will sanction this.

 

Talking about the IMA & DEMSA hows the partnership going that was announced around August 2011 (according to the link below)

 

http://www.demsa.co.uk/demsa-news/demsa-and-ima-partnership-to-help-raise-debt-advice-standards/

 

Thanks again Nick and no doubt speak to you later (think that is a certainty)

 

As always....

 

An Independent Wintry

[victoria_siempre]

Hi Wintry

 

‘We’re all in this together’.

 

‘They failed to mend to mend the roof when the sun was shining’.

 

‘I gave him a second chance, the second chance didn’t work (shift of subject is contrived)’.

 

Dr Kelly committed suicide.

 

‘It’s the right thing to do’.

 

I have dreamt of displaying all my DCA’s letters as modern art for all to see, alongside OFT, FOS ‘guidelines’ ignored routinely, for the Turner Prize to held by me.

 

Love

 

vic

[Wintry]

Hi Wintry

 

‘We’re all in this together’.

 

‘They failed to mend to mend the roof when the sun was shining’.

 

‘I gave him a second chance, the second chance didn’t work (shift of subject is contrived)’.

 

Dr Kelly committed suicide.

 

‘It’s the right thing to do’.

 

I have dreamt of displaying all my DCA’s letters as modern art for all to see, alongside OFT, FOS ‘guidelines’ ignored routinely, for the Turner Prize to held by me.

 

Love

 

vic

 

Hi Victoria

 

Thank you, I think I get it:)

 

The recently released OFT guidelines and the rest are there for all to see, maybe there are some that have not quite cottoned on yet or on the other hand they have (perhaps that is why they have gone a little quiet so to speak)

 

Fear not though......

 

"Never the Twain Shall Meet"

 

x

Edited December 8, 2011 by Wintry

[victoria_siempre]

Quite Wintry

 

"And thou must harry thy father's hold for the peace of the Border-line,

And thou must make a trooper tough and hack thy way to power..."

 

x

 

v

[brokebutnotbeatn]

vic, joking aside I think you should do this. Fantastic idea! and you could also have a second pice of newpaper clippings of all those poor people driven to their deaths. Perhaps a group CAG submission? I bet there are some artists among us who could do something fabulous with the concept....

[Wintry]

Hi

 

Interesting read below -

 

http://www.publications.parliament.uk/pa/cm201012/cmselect/cmbis/writev/1649/dm22.htm

 

Talking from experience, just the tip of the iceberg if you ask me!

 

Not to worry though, we have all these 'independent' bodies or what have you and recent new 'guidelines' now